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Conditional Volatility, Skewness, and Kurtosis: Existence and Persistence

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  • Jondeau, E.
  • Rockinger, M.

Abstract

Recent portfolio choice asset pricing and option valuation models highlight the importance of skewness and kurtosis. Since skewness and kurtosis are related to extreme variations they are also important for Value-at-Risk measurements. Our framework builds on a GARCH model with a condi-tional generalized-t distribution for residuals. We compute the skewness and kurtosis for this model and compare the range of these moments with the maximal theoretical moments. Our model thus allows for time-varying conditional skewness and kurtosis.

Suggested Citation

  • Jondeau, E. & Rockinger, M., 2000. "Conditional Volatility, Skewness, and Kurtosis: Existence and Persistence," Working papers 77, Banque de France.
    • Handle: RePEc:bfr:banfra:77
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    Citations

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    Cited by:

    1. Rockinger, M. & Jondeau, E., 2001. "Conditional Dependency of Financial Series: An Application of Copulas," Working papers 82, Banque de France.
    2. Chris Brooks, 2005. "Autoregressive Conditional Kurtosis," Journal of Financial Econometrics, Oxford University Press, vol. 3(3), pages 399-421.
    3. Ibrahim Onour, "undated". "Exploring Stability of Systematic Risk: Sectoral Portfolio Analysis," API-Working Paper Series 1002, Arab Planning Institute - Kuwait, Information Center.
    4. Tao Pham Dinh & Yi-Shuai Niu, 2011. "An efficient DC programming approach for portfolio decision with higher moments," Computational Optimization and Applications, Springer, vol. 50(3), pages 525-554, December.
    5. Onour, Ibrahim, 2008. "Forward-Looking Beta Estimates:Evidence from an Emerging Market," MPRA Paper 14992, University Library of Munich, Germany.
    6. Mantalos, Panagiotis & Karagrigoriou, Alex, 2012. "Testing For Skewness In Ar Conditional Volatility Models For Financial Return Series," Working Papers 2012:4, Örebro University, School of Business.
    7. Ángel León & Gonzalo Rubio & Gregorio Serna, 2004. "Autoregressive Conditional Volatility, Skewness And Kurtosis," Working Papers. Serie AD 2004-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    8. Andrei Leonidov & Vladimir Trainin & Alexander Zaitsev & Sergey Zaitsev, 2006. "Market Mill Dependence Pattern in the Stock Market: Asymmetry Structure, Nonlinear Correlations and Predictability," Papers physics/0601098, arXiv.org, revised Jan 2006.
    9. Leon, Angel & Rubio, Gonzalo & Serna, Gregorio, 2005. "Autoregresive conditional volatility, skewness and kurtosis," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(4-5), pages 599-618, September.
    10. Dr. Ibrahim Onour, "undated". "The Global Financial Crisis and Equity Markets in Middle East Oil Exporting Countries," API-Working Paper Series 1009, Arab Planning Institute - Kuwait, Information Center.
    11. Hübner, Georges & Lejeune, Thomas, 2021. "Mental accounts with horizon and asymmetry preferences," Economic Modelling, Elsevier, vol. 103(C).

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    More about this item

    Keywords

    GARCH Stock indices Exchange rates Interest rates SNOPT VaR;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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